What does it mean to “split” a stock and why would a company choose to do it?

Question

I don’t invest in $GME, but I noticed their investors are very excited about the stock splitting later this month. What does that mean and what are the implications?

I gather that if you owned one stock, you’ll own four after the split, but I’m not really sure why that’s cause for so much celebration.

Thanks!

In: 5

Answer 1

You’re correct, GME shareholders will receive 4 new shares for every 1 share they currently hold. As to the “why”, it is usually done to manage the share price. The 4 new shares of GME will be at 1/4 the price of the old shares when the stock actually splits. The idea is that lower prices are more attractive to a larger group of investors who might otherwise be priced out.